Wind farms take £160m off electricity bills as gas prices soar

The cost of electricity has risen because the UK relies heavily on gas to keep the lights on.

Emily Beament
Thursday 20 January 2022 17:19
Electricity prices have soared in recent months due to a spike in global gas costs (Tom Leese/PA)
Electricity prices have soared in recent months due to a spike in global gas costs (Tom Leese/PA)

Wind farms across Great Britain are returning millions of pounds to customers for the first time, helping soften some of the blow from a massive spike in energy prices.

Offshore wind farms paid back nearly £117 million for the final three months of last year, while onshore producers returned more than £40 million.

The payments are due to a complicated subsidy scheme which forces renewable energy generators to repay some of the money they charge if prices rise above a certain point.

We are sending a cheque back to the Government

Keith Anderson, ScottishPower

In recent months, electricity prices have soared due to a spike in global gas costs – more than two-fifths of Britain’s electricity is made using gas.

This means that energy bills are likely to spike by around 50% to around £2,000 per year for an average household.

But the payments from wind farms will help cushion a small part of this blow.

“We are sending a cheque back to the Government ” ScottishPower chief executive Keith Anderson told the PA news agency.

With the cost of wind energy falling even further over coming years, the UK will benefit to an even larger degree from having this secure source of energy

Dr Simon Cran-McGreehin

Dr Simon Cran-McGreehin, head of analysis at the Energy and Climate Change Intelligence Unit, said that the price of wind turbines was dropping rapidly and that, as a consequence, such repayments could become more regular in the future.

“These results show the good sense in investing in renewables over the years,” he told the PA news agency.

“These projects are now repaying some of the wholesale price that’s been driven by gas, helping to reduce customers’ bills.

“With the cost of wind energy falling even further over coming years, the UK will benefit to an even larger degree from having this secure source of energy.”

Since 2015, the so-called Contracts For Difference system has promised to top up payments to solar, wind and biomass producers if the electricity price is not high enough.

Offshore wind farms paid back nearly £117 million for the final three months of last year (Owen Humphreys/PA)

It gives wind farm owners a fixed price for the energy they produce, and takes away some of the risk of investing in the expensive turbines.

For example in 2017 the developer of the Triton Knoll wind farm said it would be built at a price of just under £75 per megawatt hour (MWh). The site is nearly completed and will come online later this year.

If electricity is selling for £50 per MWh on the wholesale market then Triton Knoll would be paid an extra £25 from energy bills.

But Triton Knoll must also give back any excess if the electricity price rises above £75 per MWh.

And due to soaring gas prices, electricity prices rose to more than £200 in the last three months of 2021, data show.

More than two-fifths of Britain’s electricity is made using gas (Peter Byrne/PA)

This means that wind farms that until now had their payments topped up started to return a lot of money to suppliers.

The price was so high that even the oldest and most expensive wind farms that were commissioned under the Contracts For Difference scheme will return money.

The money will go into a pot which will be used to offset some of the massive hike in energy bills expected to take place in April.

It will be a small but welcome boost for under-pressure energy customers and suppliers.

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