Awarding contracts for difference at power market prices and facilitating better access to balancing products could enable offshore wind to hit 30GW, potentially within the next 15 years, according to consultancy Aurora.
The firm’s report reflects that supply chain and technical innovation in offshore wind is driving down costs to the point that subsidy will soon no longer be required. The government support mechanism, the contracts for difference (CfD) scheme, could instead guarantee developers current market rates for their power.
The CfD then becomes a revenue stability mechanism, rather than price support, Aurora suggests. While that transfers some risk onto consumers, it would be offset by enabling wind farms to be built at a lower cost of capital, the report states.
By technically making offshore wind subsidy free, operators could then bid into mechanisms such as the capacity market (CM), increasing competition and driving down costs to consumers, argues Aurora. Currently subsidised technologies cannot bid into the CM.
Enabling offshore wind to better access balancing and ancillary services procured by National Grid would allow operators to ‘stack’ different revenue streams and would also increase competition, driving down overall system costs to bill payers, the report adds.
National Grid’s work to overhaul its services and bring procurement closer to real time opens the door to such developments, said Aurora, but further lessons could be learned from other markets where wind penetration is high.
See the report here.