Ed Miliband's ‘eye-watering' wind subsidy increase to hit energy bills

Telegraph

3 days ago

Ed Miliband will ramp up 'eye-watering' subsidies for offshore wind farms to tempt developers to build in UK waters – adding costs to household bills.
Under the revised scheme, Mr Miliband will offer international developers up to £116 per megawatt hour for the power they generate from the farms – far above the wholesale price of power, which last year averaged around £72.
The extra money will be added to power bills via a levy, inflating costs for households, industry and businesses.
The levy adds an estimated £24 a year to the average domestic power bill via a system known as contracts for difference. The sum was already expected to rise as the number of offshore and onshore wind farms expands and more solar plants are built. The higher prices will accelerate that increase.
The subsidies will also inflate costs for UK industry and business, which already face some of the world's highest energy costs.
The move comes as Mr Miliband faces a growing struggle to fulfil his pledge to decarbonise the UK power grid by 2030.
He is also facing increasing political challenges, with Nigel Farage's Reform UK warning it would scrap new offshore wind contracts if it wins power.
A report published by the Department for Energy Security and Net Zero (DESNZ) said the sharply increased prices were essential to overcome rising costs faced by offshore developers.
'Renewable technologies continue to face macroeconomic uncertainty and supply chain constraints – this is particularly true for wind technologies.
'The Government is continuing with the strategy of setting strike prices meaningfully above expected [electricity market] clearing prices.'
Claire Coutinho, the shadow energy secretary, said: 'These are eye-watering prices – the highest in a decade and way above the average cost of electricity last year.
'And this is before the hidden extra costs of grid, storage and wasted wind – all of which end up on our energy bills.
'Ed Miliband can't cut bills by £300 like he promised because he will always put his net zero zealotry above the economy and the cost of living. Cheap energy must come first.'
The price rise for wind developers follows the disastrous cancellation of key wind farm projects seen as essential for the UK to meet its renewables and decarbonisation targets.
The massive Hornsea 4 wind farm was cancelled by Ørsted earlier this year, arguing it could never be profitable.
Hornsea had a capacity of 2.4 gigawatts (GW) – one of the largest yet planned but the company said the £85 per megawatt hour subsidy on offer from the Government was too low.
Another project, Norfolk Boreas, was also cancelled by developers Vattenfall due to low prices.
'Definition of insanity'
If Mr Miliband wants to meet his targets he must triple offshore wind to about 50GW by 2030, double onshore wind to 30GW and nearly triple solar power to 47GW.
But the rising cost of borrowing for renewable developments plus inflation across the industry is putting all such targets in jeopardy.
Ashley Kelty, from Panmure Liberum, said the cancellation of such major projects had spooked Mr Miliband into offering ever higher prices – but he predicted it would not work.
'It's lunacy to think it could meet his targets. Supply chain constraints and rising costs means the build-out will be even slower.
'These high prices will also drive up bills. Renewables are not cheap by any metric. The gas needed to supply stable baseload will have to be imported at high cost – which is also passed through to consumers. This is the clear definition of insanity.'
A DESNZ spokesman said the newly published 'strike prices' were the maximum that might be paid and the auction – when developers offered their own prices – could see lower final prices.
'Our recent reforms will ... secure the best possible price for consumers while securing the clean energy we need to get us off the fossil fuel roller-coaster,' he said.
Richard Tice, Reform's energy spokesman, said: 'With inflation these offshore wind prices mean a 15pc increase on last year.
'They are also well over double the forecast six months ago by the climate change committee. The cost of getting to net zero will be much higher than even my worst fears. Reform will stop this negligent madness by scrapping net stupid zero.'
Kathryn Porter, an energy analyst, said: '[Mr Miliband] keeps insisting that renewables are cheap. After 35 years of subsidies, offshore wind is now massively more expensive than using gas to generate electricity.
'This is definitive proof that renewables are not cheap, and will not lower bills. If the auction clears anywhere near these maximum levels consumers will be facing 20 years of huge additional levies loaded onto their bills.'