Time to accept that wind farm costs are not falling
14 June 2023
There has been a consistent narrative that the cost of building new wind farms is falling, with falling subsidy prices being offered as evidence. I have challenged this narrative in the past, pointing out that evidence from the accounts of windfarms themselves does not support this argument, citing the work of Professor Gordon Hughes at the University of Edinburgh, and indeed his work as subsequently been replicated by Andrew Montford of the Global Warming Policy Foundation (“GWPF”). However, there is another big reason to question this narrative: turbine manufacturers are losing money hand over fist.
Falling subsidy prices at the same time as massive manufacturing losses makes no sense and is clearly not sustainable. Of all of the projects that secured Contracts for Difference (“CfD”) agreements in the most recent subsidy round, known as AR4, only two have actually taken their Final Investment Decision (“FID”) – ScottishPower’s East Anglia 3 project, and Moray West which is a joint venture between EDP Renewables and ENGIE. Ørsted has warned that Hornsea 3 could be at risk without Government action “to maintain the attractiveness of the investment environment”. It has said it will make its final investment decision later this year.
The Government has said that the CfD is structured to take inflation into account, but other than introducing 100% capital allowances for a limited period in a bid to stimulate business investments in the Spring Budget, it has offered little additional help to renewable developers. “Long-life assets” only benefit from 50% relief, with many commentators believing that wind turbines will be considered to be “long-life assets” – these are typically assets with a life of at least 25 years, which tends to be the upper limit of the life of a wind turbine.
https://watt-logic.com/2023/06/14/wind-farm-costs/
