The article talks about strike prices but doesn't provide much context.
The context: this is about bids from wind farm operators to win "contracts for difference" with the Low Carbon Contracts Company, an entity owned by the UK government. It's essentially a subsidy scheme where the wind farms can lock in a specific price per MWh for all the electricity they will produce over a certain period. But only if they bid low enough to be among the winners of the auction.
This is an extremely misleading way to report the cost of energy. It’s almost meaningless to compare the cost of wind to the cost of gas because more wind does not reduce the need for gas plant. It may reduce gas utilization, but it will increase the cost of gas on a MWh basis by increasing capacity prices.
Yes, more wind will reduce emissions, but these prices don’t mean they will reduce total system cost.
Absolutely, as long as a the energy of a wind farm displaces enough MWh of gas to cover its capital costs (incl. network costs) at the marginal price of gas it should reduce system costs. But wind energy output across an area the size of the UK is so highly correlated that additional wind capacity has diminishing returns. I suspect that the UK is already beyond the point by which additional wind is economically beneficial, but I’m not certain about that.
Also, if gas utilization falls dramatically capital costs will come to dominate. It’s not just the turbines, the gas network is costly.
Not only do the existing wind farms reduce the price of electricity by saving gas, they have had much larger effect on reducing the price households pay for gas itself, by reducing demand for that commodity.
Over the period 2010 to 2023 they reduced electric bills in the UK by about 14 billion, but reduced gas bills by about 140 billion!
This is poor reporting by Elektrek. The article compares wind and gas costs but completely fails to explain:
* the gas price in the article includes the government’s self-imposed carbon tax. The actual cost of gas (£55) is FAR lower than the £91.20 strike price Milibad has set for wind. And Miliband has locked in this terrible pricing for 20 years!
* there are huge extra costs for wind power that are not accounted for in this quoted strike price. The grid must be upgraded. Expensive new power generation capability will need to be built to compensate for the intermittency of wind
* the stated power capacity of wind generation is a theoretical maximum, and the actual capacity will be much lower in practice.
> The actual cost has to price in the impact of using it.
Is there real evidence the collected tax revenue is actually offsetting carbon emissions?
There's a lot of fraud in carbon credit systems - where often the sole benefit is feeling and/or looking good.
Is this self-imposed tax actually having a real result - or is it just artificially increasing the price of energy? If the latter, then it's not really fair to claim it's the actual cost.
>* the gas price in the article includes the government’s self-imposed carbon tax. The actual cost of gas (£55) is FAR lower than the £91.20 strike price Milibad has set for wind.
Is that unreasonable? Carbon dioxide is an externality, and it needs to be accounted for accordingly. Suppose the government is tendering contracts for milk for school lunches. One farm runs a CAFO[1] that pollutes the local river. The other has cows on a pasture that doesn't. Is it that unreasonable for the government to be like "well hang on, the CAFO farm might be cheaper the grass fed farm, but it'll cost us money to clean up all the shit they're dumping into the river, so we're going to impose a tax on the CAFO farm for their pollution"?
The government is literally comparing a raw price with a price+tax … and what makes this even more disingenuous is that the government themselves applied this tax. AND the tax is absurdly high!
> new power generation capability will need to be built to compensate for the intermittency of wind
The new wind power is mostly idling natural gas power plants, which can spin up on the rare occasions there's no wind in the North Sea. Then the UK only uses the expensive shipped LNG a few days a year. The much cheaper piped natural gas is already allocated.
Are you maybe comparing cost of gas as fuel with total cost? We will have a short period of low gas prices because there is oversupply of LNG projects coming online but that can turnaround easily. Flips in geo politics and crisis are popping up all the time.
> the stated power capacity of wind generation is a theoretical maximum, and the actual capacity will be much lower in practice.
Capacity is constant. You're talking about capacity factor, i.e., average utilization. Numbers from 2018 for Danish offshore wind farms show capacity factors approaching 50%. These brand-new turbines mounted on 150 meters+ towers in the middle of the North Sea will absofuckinglutely beat that.
1) Introduce a lot of intermittent generation into energy grid without sufficient amount of storage capacity.
2) Use marginal pricing model which effectively guarantees windfall profits for those sources.
3) Utilization of peaking power plants falls, but you still have to keep them because there is not enough storage capacity.
4) Peaking power plants rise generation costs to offset the lower utilization, further adding to the windfall profits.
5) You need more grid capacity to handle energy transfers from distributed generation sources.
5) ????
6) Act surprised when people loudly complain about electricity bills despite abundant "cheap" generation.
Intermittency of generation is an externality (same as CO2 emissions) and should be priced accordingly. People are willing to pay premium for supply stability, but the current pricing model does no account for that. Trying to change consumption habits (like smart grids, dynamic pricing, etc.) works poorly, especially for such vital resource as electricity.
I think there should be some kind of price penalty for intermittent sources dependent on total ratio of intermittent generation in the mix. At least until grid-scale energy storage technology will be advanced enough to store approximately week of total energy consumption.
For 5, add in that the new grid capacity is years behind schedule, and the existing grid capacity needs to come offline because it's decrepit, and you also have a policy to connect new sources immediately
It leads to a lot of telling new sources to dump their energy, and paying them to dump their energy, while simultaneously paying old gas generators (nearer the demand) to fire up. All for the want of more grid capacity.
> Trying to change consumption habits (like smart grids, dynamic pricing, etc.) works poorly, especially for such vital resource as electricity.
Why? Has the UK started trying recently? When I lived there nobody gave a hoot about fluctuating prices. It would have been hard to even know when electricity was expensive or not. Has it changed?
Meanwhile >three decades ago my grandparents in rural France had a big red lamp on the kitchen wall that would light up when energy was expensive. It was a part of their life and they had no problem with it. They chose that plan deliberately because it ended up cheaper.
If you’re saying that even with adaptive behavior , it’s all a wash because the constant cost of peakers is so high that you lose all savings when they kick in , no matter how little you use; ok, I believe you did the math.
But if the claim is “it’s impossible for humans to adapt their energy consumption depending on the current price of electricity”, I have seen first hand that is not true. For sure when I lived in Britain nobody did this at all, but that would be at best a British limitation, not a human one.
The vast majority of UK consumers have a pretty simple plan where they're not demand responsive. If it's pitch black and dead calm one Winter's night they pay the exact same price as midday in the summer if it's blazing sunshine and simultaneously blowing a gale across the whole country. Their retailler has done some estimates and figured on average they can sell power for, say, 25p per kWh all day, every day. Some days they're raking it in 'cos they paid a lot less than that, other days they wish the day would end, but if their team did the sums right it comes out profitable at year end.
There are people, especially people with EVs and who can do that sort of "turn on a dime" lifestyle where you do laundry when it's cheaper not because it's Thursday who pay 0p per kWh some hours and 45p per kWh for that bleak winter's night.
For now that second group are a minority but they do exist.
The enabling technology is a bit more sophisticated than your French red lamp. "Smart" meters relay your usage constantly so you can be charged in 30 minute chunks, the same way the wholesale electricity market works. This also means you can see at a glance what's going on. So that's nice. The usual conspiracy people insist this is a future tool of control by government, just like almost everything that has ever been invented, bar codes on groceries, mobile phones, newspapers, parking tickets, everything.
This does not work at scale. Sure, there is plenty of anecdotes how you can successfully play this game as a consumer living in a rural house with electric car, power wall, and rooftop solar, but try to telling about it to someone living in a high-rise apartment or to a heavy industry business. Your preaching will fall on deaf ears.
IIRC there are several utilities in the UK which provide option to price electricity dynamically, but they are not popular because people do not want to play this game. They want reliable supply of electricity for reasonable prices. Trying to mold consumption to satisfy intermittency of generation is nothing more than shifting the externality akin to telling people "you must plant trees to offset CO2 emissions!".
Intermittency is already handled by the price mechanisms, they are set quarter-hourly; if you’re not available when there is high demand you don’t get paid.
The marginal price windfalls happen specifically when you’re able to deliver at a low cost when demand is high in the same ISP.
The article quotes £147/MWh for CCGTs. These look to come from the Electricity Generation Costs 2025 [0] released on the same day as the CfD results. However there is no £147/MWh in Annex A [1]. There is a £145/MWh for CCGT delivered in 2030, but the way this was arrived at is interesting.
a) A load factor of 30% (which seems pretty low for a CCGT), that is actually ~28% (per Annex A [1] "Technical Costs and Assumptions" sheet);
b) fuel efficiency is set to be 54%, which is far lower than BAT CCGT of around 64%, which affects fuel and CO2 emissions costs;
c) the analysis missed out capacity market payments that one gets for having dispatchable power stations;
d) the analysis presumes £41/MWh of carbon costs.
The key drivers of the price are load factor (so amortised construction costs), conversion efficiency (fuel costs and carbon costs) and carbon costs themselves. These make up 90% of the LCOE.
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The context: this is about bids from wind farm operators to win "contracts for difference" with the Low Carbon Contracts Company, an entity owned by the UK government. It's essentially a subsidy scheme where the wind farms can lock in a specific price per MWh for all the electricity they will produce over a certain period. But only if they bid low enough to be among the winners of the auction.
https://en.wikipedia.org/wiki/Contracts_for_Difference_(UK_e...
Yes, more wind will reduce emissions, but these prices don’t mean they will reduce total system cost.
Also, if gas utilization falls dramatically capital costs will come to dominate. It’s not just the turbines, the gas network is costly.
Over the period 2010 to 2023 they reduced electric bills in the UK by about 14 billion, but reduced gas bills by about 140 billion!
* the gas price in the article includes the government’s self-imposed carbon tax. The actual cost of gas (£55) is FAR lower than the £91.20 strike price Milibad has set for wind. And Miliband has locked in this terrible pricing for 20 years!
* there are huge extra costs for wind power that are not accounted for in this quoted strike price. The grid must be upgraded. Expensive new power generation capability will need to be built to compensate for the intermittency of wind
* the stated power capacity of wind generation is a theoretical maximum, and the actual capacity will be much lower in practice.
The actual cost has to price in the impact of using it.
For example, it's cheaper for UK water companies to pump sewage into rivers and onto beaches:
https://www.bbc.com/news/articles/cz9kz8ydjpno
https://www.bbc.com/news/uk-england-london-67357566
https://www.bbc.com/news/articles/c5yprnd848ko
https://www.theguardian.com/environment/2025/sep/16/sewage-o...
But maybe it's a nice idea to force them to deal with sewage properly so you don't have to live in rivers of shit.
Nonetheless, two thoughts come to mind:
1) we don't know the "actual cost" of offshore wind
2) we may not be able to afford even the "market cost" of offshore wind without the natgas tax subsidy
Is there real evidence the collected tax revenue is actually offsetting carbon emissions?
There's a lot of fraud in carbon credit systems - where often the sole benefit is feeling and/or looking good.
Is this self-imposed tax actually having a real result - or is it just artificially increasing the price of energy? If the latter, then it's not really fair to claim it's the actual cost.
Is that unreasonable? Carbon dioxide is an externality, and it needs to be accounted for accordingly. Suppose the government is tendering contracts for milk for school lunches. One farm runs a CAFO[1] that pollutes the local river. The other has cows on a pasture that doesn't. Is it that unreasonable for the government to be like "well hang on, the CAFO farm might be cheaper the grass fed farm, but it'll cost us money to clean up all the shit they're dumping into the river, so we're going to impose a tax on the CAFO farm for their pollution"?
[1] https://en.wikipedia.org/wiki/Concentrated_animal_feeding_op...
Yes it is unreasonable. Spending money to reduce carbon is just a subsidy for other countries who DGAF and will emit both theirs and yours.
It’s not unreasonable to report the facts and let the reader decide. The carbon tax is a readily available fact where in your example is subjective.
The self-imposed tax is there and isn't going anywhere, so it's included in the price.
The other two points are accounted for in the strike price, because this capacity came into being and is now offering electricity at the strike price.
That's not true at all, Reform could get in and remove it day 1!
The new wind power is mostly idling natural gas power plants, which can spin up on the rare occasions there's no wind in the North Sea. Then the UK only uses the expensive shipped LNG a few days a year. The much cheaper piped natural gas is already allocated.
Deleted Comment
Capacity is constant. You're talking about capacity factor, i.e., average utilization. Numbers from 2018 for Danish offshore wind farms show capacity factors approaching 50%. These brand-new turbines mounted on 150 meters+ towers in the middle of the North Sea will absofuckinglutely beat that.
https://www.modernpowersystems.com/news/eight-new-uk-wind-fa...
2) Use marginal pricing model which effectively guarantees windfall profits for those sources.
3) Utilization of peaking power plants falls, but you still have to keep them because there is not enough storage capacity.
4) Peaking power plants rise generation costs to offset the lower utilization, further adding to the windfall profits.
5) You need more grid capacity to handle energy transfers from distributed generation sources.
5) ????
6) Act surprised when people loudly complain about electricity bills despite abundant "cheap" generation.
Intermittency of generation is an externality (same as CO2 emissions) and should be priced accordingly. People are willing to pay premium for supply stability, but the current pricing model does no account for that. Trying to change consumption habits (like smart grids, dynamic pricing, etc.) works poorly, especially for such vital resource as electricity.
I think there should be some kind of price penalty for intermittent sources dependent on total ratio of intermittent generation in the mix. At least until grid-scale energy storage technology will be advanced enough to store approximately week of total energy consumption.
It leads to a lot of telling new sources to dump their energy, and paying them to dump their energy, while simultaneously paying old gas generators (nearer the demand) to fire up. All for the want of more grid capacity.
https://ukerc.ac.uk/news/transmission-network-unavailability...
Why? Has the UK started trying recently? When I lived there nobody gave a hoot about fluctuating prices. It would have been hard to even know when electricity was expensive or not. Has it changed?
Meanwhile >three decades ago my grandparents in rural France had a big red lamp on the kitchen wall that would light up when energy was expensive. It was a part of their life and they had no problem with it. They chose that plan deliberately because it ended up cheaper.
If you’re saying that even with adaptive behavior , it’s all a wash because the constant cost of peakers is so high that you lose all savings when they kick in , no matter how little you use; ok, I believe you did the math.
But if the claim is “it’s impossible for humans to adapt their energy consumption depending on the current price of electricity”, I have seen first hand that is not true. For sure when I lived in Britain nobody did this at all, but that would be at best a British limitation, not a human one.
https://en.wikipedia.org/wiki/Economy_7
My parents would set timers on the dishwasher, washing machine etc too run at night.
There are people, especially people with EVs and who can do that sort of "turn on a dime" lifestyle where you do laundry when it's cheaper not because it's Thursday who pay 0p per kWh some hours and 45p per kWh for that bleak winter's night.
For now that second group are a minority but they do exist.
The enabling technology is a bit more sophisticated than your French red lamp. "Smart" meters relay your usage constantly so you can be charged in 30 minute chunks, the same way the wholesale electricity market works. This also means you can see at a glance what's going on. So that's nice. The usual conspiracy people insist this is a future tool of control by government, just like almost everything that has ever been invented, bar codes on groceries, mobile phones, newspapers, parking tickets, everything.
IIRC there are several utilities in the UK which provide option to price electricity dynamically, but they are not popular because people do not want to play this game. They want reliable supply of electricity for reasonable prices. Trying to mold consumption to satisfy intermittency of generation is nothing more than shifting the externality akin to telling people "you must plant trees to offset CO2 emissions!".
The marginal price windfalls happen specifically when you’re able to deliver at a low cost when demand is high in the same ISP.
This just seems like data-free fear mongering.
When the wholesale prices is about the CFD strike price then the excess funds are paid to the Low Carbon Company and used to reduce electricity bills
Storage capacity is being build out - it's one of the prime uses of old power station sites (because they already have grid connectivity)
Grid capacity is being built out e.g. the Eastern Green links to allow transfer of power from Scotland to England and reduce curtailment payments
a) A load factor of 30% (which seems pretty low for a CCGT), that is actually ~28% (per Annex A [1] "Technical Costs and Assumptions" sheet);
b) fuel efficiency is set to be 54%, which is far lower than BAT CCGT of around 64%, which affects fuel and CO2 emissions costs;
c) the analysis missed out capacity market payments that one gets for having dispatchable power stations;
d) the analysis presumes £41/MWh of carbon costs.
The key drivers of the price are load factor (so amortised construction costs), conversion efficiency (fuel costs and carbon costs) and carbon costs themselves. These make up 90% of the LCOE.
[0] https://www.gov.uk/government/publications/electricity-gener... [1] https://assets.publishing.service.gov.uk/media/6967b0c806fab...
UK secures record supply of offshore wind projects
https://news.ycombinator.com/item?id=46614777
Dead Comment