April 8, 2025 - 7:00am
Last week, Energy Secretary Ed Miliband approved the 1,200 MW offshore wind farm, Rampion 2. The scheme will occupy approximately 196km², the size of Nottingham, off the Sussex coast. It will consist of up to 90 turbines, each taller than the Eiffel Tower.
Despite the self-congratulation from Miliband and others, this is not yet a done deal, although getting Development Consent is certainly a big step. Rampion 2 does not yet have a government subsidy secured, with the important auction round being delayed.
The delays are because the Government has launched a consultation into changing the terms of the Contracts for Difference agreements. These are agreements with renewables developers — including RWE, the German energy giant which is responsible for the Rampion schemes — which specify a “strike price” per unit of electricity generated. If the market price for electricity is below the strike price, the Government must make up the difference.
The most recent auction round cleared with strike prices above the current market price for offshore wind. (Don’t be misled by Government reports: strike prices there are always quoted in 2012 money, making them appear significantly cheaper than they are.) It is widely expected that the next rounds will have even higher prices, as supply chain inflation, and higher pricing from turbine makers bite. This is bad news for consumers already struggling under the weight of £17 billion per year in environmental levies, carbon and other energy taxes.
Miliband has set ambitious targets for the delivery of renewable generation over the next five years. Under his Clean Power 2030 Plan, he is targeting 43-50 GW of offshore wind, 27-29 GW of onshore wind and 45-47 GW of solar. This requires a huge increase in the amounts of these technologies being installed by 2030: offshore wind delivery must increase by a factor of four compared with the current rate, with onshore wind delivery increasing fivefold, and solar delivery increasing seven times over.
The only real lever Miliband has to secure anything close to these volumes is to offer ever larger subsidies to developers, in order to convince them to take on new projects. But even if he manages to secure the volumes he seeks, the ability of Britain’s creaking power grid to deliver the resulting electricity to consumers is limited.
In the past decade, energy regulator Ofgem has required network operators to prioritise the connection of new renewables regardless of whether their output can be used. It has prioritised this above replacement of ageing legacy grid infrastructure, a failing that was highlighted by the recent blackout at Heathrow Airport caused by a transformer built in the Sixties caught fire in a nearby substation.
The consequence is that, for example, the Seagreen wind farm, located off the coast of Angus in the North Sea, was last year curtailed twice as much as it generated. Curtailment happens when a wind farm is able to generate electricity, but the grid has insufficient capacity to deliver it to the people who use it. The National Energy System Operator instructs the wind farm to turn down its output and a gas-fired power station closer to consumers is instructed to turn on. The National Energy System Operator is required to pay “curtailment fees” to replace lost income, which for Seagreen amounted to £65 million last year. These fees are ultimately passed on to the consumer through increased energy bills.
Rampion 2 was approved in the face of significant local opposition. But consumers across the country will have to pay for it, and when the level of Government subsidy is finally revealed, we’ll be blown away by the costs.
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