Is Wind Energy Expensive? Debunking the myth!
Just google “Is wind power expensive?” and you’ll find a wide range of opposing answers.
This is because power generation, the energy markets and the energy transition are infinitely complex issues that only a handful of experts genuinely understand.
This leaves ample room for sensationalists to present ‘alternative’ views using out-of-context information and incendiary tones. Regrettably, these assertions often overlook the big picture.
In this article, we will objectively show why wind power is relatively cheap and debunk naysayers’ arguments.
Contents List 📚
- What’s the price of wind power in the UK?
- The price of UK wind power according to CfDs
- Price of UK wind power according to BEIS’s LCOE
- Debunking “Wind Power is Expensive”
- Consensus: Wind Power is cheap
What’s the price of wind power in the UK?
Much content from traditional and social media immediately takes a stance in favour or against wind energy, often aiming to elicit an emotional reaction from us (the readers).
This is great for a dramatic piece, but not when we’re trying to understand something– like trying to truly determine if wind power is cheap or expensive.
While you can quickly google the price of any commodity like crude oil, gas or gold, it’s not actually possible to do this specifically for wind energy, and here is why.
There’s no price for wholesale wind power in the UK
Regrettably, the UK continues to employ a retrograde electricity pricing mechanism. The wholesale price of ALL electricity generated is set by the most expensive source of electricity needed to meet demand at any given time instead of a price that reflects all sources.
This was OK when the UK used predominantly coal and natural gas, but it is no longer useful in the age of renewables. It has, however, been extremely lucrative for business energy suppliers, as natural gas has predominantly been the most expensive source for the last couple of years.
In any case, it’s not possible to get direct wholesale wind power prices from market data.
How do we find the price of wind energy in the UK?
Since there is no direct pricing data, we can check the following two things to determine the price of UK wind power:
- Wind power ‘strike’ prices from the Contracts for Difference (CfD) auctions.
- The Levelised Cost of UK Electricity (LCOE) is determined by BEIS.
The first (1) represents what developers consider a “fair price” for selling their wind power in £/MWh, while the second (2) is the most thorough estimate of the cost of building a new wind farm. So let’s see what each of these suggests…
The price of UK wind power according to CfDs
There have been five rounds of CfD auctions so far, held every two years since 2015. The trends from these auctions speak for themselves: the prices at which developers are willing to sell their electricity have been rapidly declining and have now reached a low plateau:
|CfD Allocation Round||Strike Price Range (Inflation-adjusted to 2023)|
|Round 1 (2015)||£142 per MWh|
|Round 2 (2017)||£81 per MWh|
|Round 3 (2019)||£50 per MWh|
|Round 4 (2021)||£49 per MWh|
|Round 5 (2023)||No Deal!|
The absence of successful bids for wind power in this year’s latest auction is because developers couldn’t meet the government’s lowest offer, but this is more of a change in expectation than wind power suddenly becoming expensive.
While it’s true that the cost of building a wind farm has recently risen due to a combination of global factors like inflation and supply chain disruptions, which turbines are susceptible to, the CfD auction would have probably succeeded with a raise of even a few pence per MWh.
Anyway, taking Round 4 (2021) prices for wind power, the inflation-adjusted cost of offshore wind power is, on average, £49 per MWh
💡 Note that there are no auctions for onshore wind power as the UK keeps upholding a moratorium (i.e. a ban until further notice).
Price of UK wind power according to BEIS’s LCOE
BEIS recurrently releases a Levelised Cost of Electricity (LCOE) report, and the 2023 update keeps following the trend established by its predecessors: Commercial wind and solar power are by far the cheapest sources of electricity.
We’ve selected the relevant data from the report for (1) onshore wind, (2) offshore wind, and (3) CCGT (Combined Cycle Gas Turbine). The data shows the expected costs of commissioning each at different times in the future:
|Commisioning in 2025||Commisioning in 2030||Commisioning in 2035||Commisioning in 2034|
|CCGT||£114 per MWh||£139 per MWh||£165 per MWh||£179 per MWh|
|Offshore Wind||£44 per MWh||£39 per MWh||£43 per MWh||£41 per MWh|
|Onshore Wind||£38 per MWh||£36 per MWh||£36 per MWh||£36 per MWh|
Despite LCOEs being essentially forecasts (and like any forecast –like the weather– should always be taken with some uncertainty), the prices reported closely match those of the auction, giving us more confidence that this is truly a representative price.
We’ll take the inflation-adjusted cost of offshore wind power commissioning in 2025 as our representative wind power price: £44 per MWh.
The advantage of LCOEs is that we can directly compare these prices with those of other competing technologies under similar criteria. Turns out wind power is almost three times cheaper than commissioning a new gas power station (£114 per MWh), and the difference only gets bigger over time.
Consensus: Wind Power is cheap
Taking the average of these two data points leaves us with an inflation-adjusted price of £47 per MWh for offshore wind power.
We’ve already established this is cheaper than natural gas, but what about nuclear, biomass and coal– which typically compete as easily scalable alternatives?
Unfortunately, the latest 2023 LCOE doesn’t cover these technologies because BEIS is in the process of gathering new data for an updated study, so we’ll use the 2020 LCOE as a reference instead:
|Commisioning in 2025||Commisioning in 2030|
|Nuclear||£95 per MWh||£78 per MWh|
|Biomass||£87 per MWh||£87 per MWh|
|Coal ACS with CCS||£136 per MWh||£131 per MWh|
|Coal IGCC with CCS||£148 per MWh||£144 per MWh|
The table shows how the prices of these technologies are between two and three times more expensive than wind power. Even considering the limitations of LCOEs, it’s doubtful that these technologies could make a difference.
This means that we can categorically confirm that wind power is much cheaper than any of these technologies, and it is fair to call it ‘cheap’.
This, however, doesn’t prevent opportunists from unfairly arguing against this overarching conclusion. In the following sections, we try to explain their line of thought and separate objectivity from exaggeration.
Debunking “Wind Power is Expensive”:
Here are some of the typical arguments against wind power being a cheap source of energy:
1. The rising costs of wind turbines make it “expensive.”
Wind turbines have become more expensive, and the recent failure to secure a single CfD wind power auction is a testament to this. Supply chain disruptions since Covid, rampant inflation and the volatile oil and raw materials prices have caused wind turbine prices to creep up.
Unfortunately, what naysayers fail to mention is that this cost increase is expected to be transitory and in fact affects all other power generation technologies. While wind turbines are certainly more sensitive to this, this is affecting the prices of all technologies.
Also, it’s hard to argue how this would bridge the existing price gap between wind farms and larger thermal and nuclear stations. This is without considering the capital risks of investing in these larger alternatives vs that of wind farms, their lack of adaptability to distributed grids, and their potential exposure to a utility death spiral.
There’s also the argument that gas prices are even more volatile (as we’ve seen recently) and that nuclear and biomass also need to source fuel for their operations and are exposed to global geopolitics. Wind may be intermittent, but at least it didn’t stop blowing when Russian troops advanced into Ukraine!
💡 Comparing wind to other renewables is another matter; solar power is arguably on its way to becoming the dominant global energy source. However, this is rarely the argument at stake.
2. Wind power is to blame for the current energy crisis
As we discuss in greater depth in our wholesale prices analysis, the energy crisis is predominantly due to the rising cost of natural gas. The final straw to the spike in prices was certainly the conflict in Ukraine. Still, experts have identified a chronic under-investment in key gas infrastructure (such as the closure of the UK’s sole strategic natural gas storage facility) over the previous years as another factor.
Vocal critics blame the energy transition for this under-investment, with renewable energy given financial priority. While this shift in financing is true, it’s another short-sighted remark that misses the big picture.
Firstly, Carl Sagan’s climate change explanation to the US Congress as early as 1985 is a testament to the prolonged reaction in bootstrapping the energy transition. Instead, we’ve been left with a frantic late start, which inevitably leads to shortcomings, like the under-investment in gas infrastructure.
Secondly, the electricity market would have been impacted significantly less if the UK had adapted its wholesale pricing system to reflect the cheap price of wind power and other renewables. Instead, wholesale electricity prices were dragged up as natural gas rapidly spiked to record highs.
In fact, during that time, the UK was generating record amounts of cheap wind power, which may even lead to negative electricity prices in some instances!
3. Wind power is only cheap because of the subsidies
While it’s true that wind power receives help from the UK government, this is common practice in the early stages of any energy technology until it can compete with energy sources with long track records, such as nuclear, biomass and natural gas, on its own.
The UK government was instrumental in rolling out all these technologies during their inception. Concrete examples include direct investment into developing the National Gas Transmission System and even limiting the liability of nuclear operators to significant incidents as part of the Nuclear Installations Act 1965.
But the ultimate proof that this is an exaggerated fact is the diminishing CfD auction prices in an environment where subsidies have largely remained constant. Wind power has become three times cheaper in less than a decade of maturity.
And unlike natural gas, coal or biomass, these are low-carbon MWh of electricity that will help mitigate the effects of climate change, which may be invaluable in the long term.
A comprehensive list of subsidies currently available to wind power projects in the UK.
4. Wind power is intermittent and can’t replace baseload sources
This is undoubtedly a valid criticism of wind power and its main Achilles heel: the output of wind power cannot be adjusted to our requirements and depends on the behaviour of wind resources.
On the other hand, natural gas and biomass plants are easy– boiler output can be adjusted with the amount of fuel being injected. Nuclear plants don’t have this flexibility, but the reactor is the ‘ultimate’ baseload power; it will consistently generate electricity for as long as there is fuel.
However, turning intermittent renewables like wind power into “complete” solutions is far from an impossibility and forcing a grid transformation will be overall beneficial to the UK in the long run as renewables rapidly become the cheapest form of electricity, at home and abroad.
Firstly, let’s make clear that renewables featuring energy storage systems automatically turn them into the ultimate form of “baseload” power, something that has never been seen before.
Renewables provide the lowest carbon energy, while energy storage can be tailored for any application. Flywheels can adjust millisecond-scale fluctuations for ultimate stability, Pumped Storage Hydro can store GWh of energy that can switch between charging and discharging faster than any natural gas plant can respond to a call from grid operators.
Having these energy storage and stabilisation infrastructures provides a high-quality electricity supply that is useful for all industries. Take cloud storage as an example: most facilities have to invest in their electricity stabilisers and backup power.
Secondly, the only other technology that can provide baseload low-carbon power is nuclear energy. While refurbishing coal plants with a reactor or installing SMRs may be a way to reduce its cost, nuclear energy is currently expensive. It lacks the demand flexibility capabilities of renewable-energy storage combos.
We have covered this topic in a lot of detail on our other blogs:
Our final argument is the inevitable rise of distributed grids, which is often ignored in this discussion. Households and businesses are installing solar panels and solar batteries at unprecedented rates, producing and storing their electricity and creating a fully decentralised “Virtual Power Plant”.
Wireless EV chargers, blockchain-based smart meters, solar roof tiles, alternative wind power apparatus: the revolution is stealthily taking place behind the scenes, and this future will significantly benefit from a national grid v2.0– one that the roll-out of wind power is helping to bootstrap. Sticking to traditional power generation will only spell doom for the UK’s energy future.
5. Wind power is “thermodynamically inferior”
We can confidently say that using these terms is simply nonsense.
Firstly, “thermodynamically inferior” is just a media-friendly term; it doesn’t actually mean anything. It elicits that wind power is inefficient at converting a “low-density” resource like the wind into a useful form of electricity while splitting atoms in a reactor or burning energy-dense natural gas is “thermodynamically superior”.
While this may appear true in our imagination, it doesn’t actually mean anything useful. If this term means anything, it means efficiency, i.e. how much energy is harnessed from what is put in.
But when you look at the typical efficiency of different power generators (which is, in itself, nuanced and variable), there clearly isn’t a winner:
But more importantly– efficiency in this context is irrelevant because wind renews itself and doesn’t require any human effort to produce: it’s free, inexhaustible fuel available on demand! On the other hand, natural gas has to be extracted and processed, biomass has to be sourced and sorted, and uranium needs to be mined and refined.
Wind is future-proof, independent of geopolitics, as a low cost per MWh and minimal carbon emissions.
6. Wind power is not truly “environmentally friendly”
While it is true that wind power produces waste and requires disproportionately high quantities of metals that need to be mined at an environmental price, these claims are taken grossly out of proportion.
For example, the effects of wind turbine waste have been deemed a ‘climate disaster’ when, in reality, it’s an infinitely minimal issue compared to the hugely detrimental effects of the coal and natural gas industries. Wind blades are inert waste. Natural gas extraction inherently leaks huge quantities of methane.
Additionally, other controversial renewable technologies, such as biomass, are losing credibility. For example, research into the supply chains of Drax’s biomass power station has found that it had been sourcing its wood chips unsustainably for years and that its carbon accounting is largely greenwashed and off the mark.
Like any human action, wind power certainly has an environmental footprint. It’s just comparably much, much lower than all non-renewable technologies!
The consensus: UK Wind Power is not ‘Expensive’
We first saw how two reliable price indicators showed wind power to be cheap.
Then, we saw how arguments used to discredit wind power are usually taken out of proportion.
The only way to justify wind power as expensive is by saying that non-renewable energy is inexhaustible and that human climate change isn’t true– a different matter altogether!
What subsidiaries are available to wind power in the UK?
Let’s take a look at the different mechanisms that exist to incentivise renewable energy generation (Remember that there is a global scientific consensus that we need to reduce carbon emissions– but that is a matter we will address in a second):
- Contracts for Difference (CFDs) – Auctions permit developers to bid on the price per MWh that they sell their electricity for to provide constant, predictable revenue and improve the feasibility of these projects.
- REGOs (Renewable Energy Guarantees of Origin) – Certificates of proof that a unit of electricity was produced by renewables. Electricity suppliers purchase these in addition to the electricity to make their tariffs ‘greener’.
- Carbon Credits: Many wind power projects also issue carbon credits and sell them in the voluntary carbon market (VCM) to prevent emissions.
- Indirect Support: The UK also facilitates infrastructure such as ports and supply chain facilities. They may also streamline planning and permitting for these projects and try to alleviate the time for a grid connection.
What are the costs of a wind farm project in the UK?
For a given kWh of wind power, the capital and operational costs are as follows:
- Land: A long-term lease or outright purchase, the former being more common on agricultural land in the UK.
- Turbines: Commissioning the turbines from a manufacturer. Large manufacturers include Vestas (Denmark), Siemens (Spain/Germany), GE (USA) and Goldwind (China). Oh, the cost of transporting them to the UK on small B-roads!
- Supporting Infrastructure: Building roads, foundations, electrical infrastructure, cabling, meteo towers and monitoring equipment. UK wages are typically considered high.
- Grid Connection: Connecting the project to the national grid + Cost of waiting!
- Project Development: All the technical, legal, environmental, and social studies required, permitting applications, etc. Permits, in particular, can be a pain in the UK (i.e. look at Heathrow Terminal 2 or HS2…).
- Financing: Most project developers will have to take a loan to finance the project and pay interest from the get-go.
- Insurance: Yes, most projects get insurance, especially during construction, where many things can go wrong (i.e. unfavourable weather, global pandemics, supply chain issues).
- Operations and Maintenance (O&M): Regular servicing and minor repairs to ensure turbines are running efficiently. This could include oil changes, sensor checks, and cleaning. There’s also unscheduled maintenance (i.e. unexpected breakdowns, replacing worn-out components).
- Software & Monitoring: Costs associated with software for remote monitoring and diagnostics of the turbines. There’s also environmental monitoring, habitat management, etc.
- Land Lease Payments: If the land isn’t owned outright, there will be ongoing payments to the landowner(s) based on the lease agreement. This includes the lease for any supporting off-site facilities like offices or storage space.
- Insurance: Covering potential damages to the turbines, third-party liabilities, business interruption, and other risks.
- Grid Connection and Use-of-System Charges: Ongoing fees related to using the local electricity distribution network or the National Grid.
- Admin: Salaries and associated costs for those managing the wind farm’s day-to-day operations. It can include utilities, security and training.
- Community Contributions: Some wind farms in the UK commit to annual payments or contributions to local community funds.
- Reserve/Decommissioning Fund: Setting aside money for emergencies not covered by the insurance and the mandatory decommissioning fund.
What are the revenue streams of a wind farm in the UK?
In the UK, wind farms can benefit from various revenue streams based on both the electricity they produce and various support mechanisms implemented by the government to promote renewable energy. Here are the primary revenue streams for a wind farm:
- Power Purchase Agreements (PPAs): The most direct revenue stream for wind farms is the sale of electricity. Wind farm operators often enter into PPAs with utilities or other large consumers where they agree on a price for the electricity generated over a set period. The PPA provides both the buyer and the wind farm operator with a measure of price certainty.
- Wholesale Electricity Market: If not locked into a PPA, wind farms can sell their electricity on the wholesale market. However, prices here can be more volatile, depending on supply and demand dynamics.
- Contracts for Difference (CfD): One of the UK’s central government incentives for renewable energy. Under the CfD scheme, qualifying projects receive a top-up payment if the wholesale electricity price is below a set ‘strike price’. Conversely, if the wholesale price goes above the strike price, the generator pays back the difference. This system provides revenue stability for wind farm operators.
- Balancing Mechanism: Wind farms can sometimes earn revenue by providing services to the National Grid to help balance supply and demand. This can include adjusting their output in response to grid requirements.
- Embedded Benefits: Smaller generators that are connected to distribution networks (as opposed to the transmission network) might receive payments known as “embedded benefits.” These arise from the value the generator provides by being close to the point of consumption, thus reducing the strain on the transmission network.
- Renewable Obligation Certificates (ROCs): A legacy scheme before CfDs and REGOs that is still being used by older wind farms that were accredited during its period. Under this system, energy suppliers were obliged to source a certain percentage of their power from renewable sources and would purchase ROCs.
- Battery Storage and Ancillary Services: Some wind farms incorporate battery storage, allowing them to store electricity when there’s excess generation and then sell it when demand (and prices) are high. They can also earn revenue from grid services like frequency response.
- Carbon Credits: Though not a direct revenue stream for many, reducing CO2 emissions by using wind energy can be monetized in some scenarios, especially if there’s a carbon trading mechanism in place.
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