Oil, Gas, Electricity, Coal, Nuclear, Hydropower, Wind, Sun, Waves and Biomass
Wind farms old and new
The question often asked is why green energy is not cheaper than energy that relies on fossil fuels.
There are three systems in place at the moment when it comes to paying for renewable energy.
First, the older wind farms have the Renewable Obligation System in place. They keep surplus funds when prices are high.
Second, the newer wind farms (since 2015) have Contracts for Difference. They are guaranteed a minimum price and are paid if the market is lower, but they return the excesses back when prices are higher as is currently the case.
This will feed through to household energy bills this winter. The October 2022 price cap, at a record £3,549, would have been £23 higher if not for these payments being returned.
But a smaller amount of wind and solar generation in Britain are sold under the CfD scheme, while 32 GW of renewables are sold under the older Renewable Obligation system, where they get to keep the extra money.
The third system is how energy is “ordered” by the Grid from gas generation. At the moment, this system is linked to the wind farms so they are all paid at the same level. Gas prices affect about 40% of the electricity market.
The solution is to separate green suppliers from fossil fuel suppliers and to move all wind farm suppliers onto the same system with Contracts for Difference. The structure needs to catch up with the present needs instead of relying on something that is now out of date.