Consumers could save £2 billion if green light given for reform of energy generation auctions

An independent report published today has revealed consumers could save more than £2 billion if the Government’s planned renewable energy auctions are opened up to include a wider mix of technologies. Drax commissioned NERA Economic Consulting and Imperial College to look at hidden costs that are not reflected in the contracts Government awards for renewable generation.

These hidden costs, or whole system costs are increasing as intermittent renewables – those reliant on the sun and wind – increase. These intermittent renewables mean other forms of power generation need to kick in, and flex up and down to meet electricity demand. These costs are passed on to consumers via their energy bills.

Currently the Government is planning three auctions for new renewable energy contracts – Contracts for Difference (CfDs) – planned over the next four years, and all are focused on offshore wind. The new research shows significant differences in the true costs of renewables once these additional costs are recognised. Offshore wind could require a CfD of £127 per MWh, onshore wind £92-97 per MWh, solar £96 per MWh, and biomass £84 per MWh.

Once these new support levels are modelled over the planned energy auctions, the new energy mix that could win contracts is shown to save consumers £1.9 -£2.2 billion. This support is already paid for through energy bills and the new cost-efficient mix would lessen the impact.