How much is onshore wind subsidised and how much does it contribute to household energy bills?
Since wind turbines are a relatively new technology, generating electricity from renewable technologies, including onshore wind, is currently more expensive than generating electricity from fossil fuels.
Although onshore wind is among the cheapest renewables, and its costs have decreased substantially in the past years, it still requires some financial support to make it viable and ensure that renewable targets are met.
Like other renewable sources, onshore wind has been subsidised through the UK Renewables Obligation. This requires electricity suppliers to obtain a certain number of certificates called ‘Renewable Obligation Certificates’ (or ROCs), either by buying them in the market (at around £45 each in 2016) or by purchasing renewable electricity. The subsidy will cease to be available for new generators in April 2016 (but will remain in operation for existing ones).
Alternatively, as from 2014, renewable electricity generators can apply for Feed-in-Tariffs with Contracts for Difference (CfDs). With CfDs, generators can sell their electricity at a ‘strike price’, which reflects the cost of investing in a particular low carbon technology. The strike price for onshore wind is £95/MWh between 2014 and 2017, and will be reduced to £90 up to April 2019. After that date, no more subsidies will be available for onshore wind.
ROCs and CfDs costs are largely passed on from the electricity suppliers to consumers’ bills. According to DECC, in 2014 onshore wind subsidies (at the time only in the form of ROCs) accounted for about £36 in a yearly electricity bill of an average UK household, which was about £630. In 2020 ROCs and CfDs impact on bills is expected to be, respectively, £48 and £30.