Investment in renewable and low-carbon energy production is a way of resolving the emerging climate crisis. Some of these investments now provide not only a social and environmental benefit but also an economic benefit for several European governments and their citizens.
The study focuses on offshore air auctions conducted by the governments of five European countries, as reported in Nature Energy. Air production in Germany and the Netherlands does not require any subsidies, allowing them to be more competitive than fossil fuel production, which remains largely subsidized.
However, given how subsidies work in the UK, the group suggests that wind power generation here will soon generate “negative subsidies”, new wind farm projects will reimburse the government, which will pay citizens for low-cost electricity bills.
Lead author Dr. Malte Jansen, from the Centre for Environmental Policy at Imperial College, said in a statement, “Offshore wind power will soon be so cheap to produce that it will reduce fossil-fuel power plants and could be the lowest energy power for the UK. Fuel subsidies are used to push fuel bills forward, but in a few years, cheap renewable energy will see it come down for the first time. This is an amazing development.”
Companies that want to build a wind farm will have to bid to the government on how much they will sell the energy they produce, in the UK. The winning company then enters into a “contract for difference”. If the price set by the company is more than the cost of electricity they produce, the government will cover whether the consumers are in the form of subsidy.
However, it appears that contracts awarded at £40 per megawatt-hour in September 2019 will be lower than the wholesale price, meaning the company will reimburse the British government for being able to sell its electricity. The price was already one-third lower than the cost set for the 2017 auction and two-thirds lower than in 2015.
Dr. Iain Staffell, also at Imperial College, explained, “This astonishing progress has been made possible by new technologies, and efficient economy and efficient supply chains around the North Sea, but also by setting a decade-long policy to reduce the risk of investing in seawater, which has financed this huge billion Pound projects much cheaper.”
“These new wind farms have set the stage for the rapid expansion needed to meet the UK’s production target of 30 percent of offshore winds by 2030. Coastal winds will be important in helping the UK and the world more broadly with the added bonus of reducing consumer energy bills. Reach carbon emissions.”