In their monthly column, Climate Action Stockton and Villages focus on renewable energy

Our energy bills have been spiralling with the Government blaming global gas prices, while others have blamed the cost of renewable energy. In fact, during the current energy crisis, renewable energy helped to protect us from the full effects of global gas prices.

There is so much misunderstanding and misinformation about the cost of renewable energy, so we felt it important to explain how renewable energy finances work.

How renewable energy prices are set

The UK Government encouraged the private sector to invest in renewable energy after accepting the need to mitigate climate disaster through reducing CO2 emissions. This financial mechanism is called "Contract for Difference" (CfD) and involves an auction of contracts to supply large-scale renewable electricity.

Darlington and Stockton Times: Looking down to the turbines at Redcar, from the coast road by Pat Blewitt

The Government sets the amount of renewable energy required and a maximum price that generators will be paid for each unit of electricity. Generators bid to supply a certain amount of renewable energy at a price below the maximum. At the end of these annual auctions the bids accepted set the strike price which all the generators will be paid for all the energy.

Why renewable energy saves us money

The CfD provides a fixed price to the generator (strike price). If the market reference price (average market price for electricity in the UK market) is less than the strike price, renewable energy increases our electric bills, as was the case in the early days of renewable energy. However, if the market reference price is more than the strike price then renewable energy actually reduces the cost of our bills.

The strike price has been falling as renewable energy generation has become more established and cheaper, whereas gas prices have gone up. Since 2021 renewable electricity has been saving us money.

Renewable electricity and energy security

UK fixed price renewable electricity increases energy security. Fossil fuels extracted from the North Sea are sold globally at the market price, giving no energy or price security.

Darlington and Stockton Times:  Climate Action Stokesley and Villages

Renewable energy is intermittent, needing the wind blowing or the sun shining, so we also need investments in energy storage to transition to a larger share of cheap renewable energy to truly have energy security.

Why the 2023 CfD offshore wind auction failed

In the 2023 auction the maximum price guaranteed by the Government for offshore wind was £44/MWh compared to £92.50/MWh for Hinkley Point C. The offshore wind companies refrained from bidding in the 2023 round, as the price was too low to cover the increased costs of construction due to inflation.

This predictable consequence means that UK electricity prices in 2026 and beyond will be higher, the UK will have less energy security and we will miss our net zero target.

The Government halt to onshore wind in 2013 added £180 to everyone’s annual electricity bills in 2022. So further delays to increasing renewable energy construction decreases our energy security and increases our energy prices.

What you can do

Ask your MP to guarantee renewable energy is not delayed and to divert the Rosebank oilfield’s £3.9bon subsidy to energy storage to ensure affordable and secure UK energy.