Wind Power: Seas and Oceans

Energy and Climate Change written question – answered on 18th October 2013.

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Photo of Peter Aldous Peter Aldous Conservative, Waveney

To ask the Secretary of State for Energy and Climate Change what weight his Department gave to the National Grid's Call for Evidence 2012 and his Department's Electricity Generation Costs Report 2013 in setting the draft offshore wind strike price; and if he will publish in full his Department's analysis of factors underlying that decision.

Photo of Michael Fallon Michael Fallon The Minister of State, Department for Business, Innovation and Skills , Minister of State, Department of Energy and Climate Change

As detailed in ‘Annex B: Strike Price methodology’1 of the ‘Consultation on the draft Electricity Market Reform Delivery Plan’ there are a range of factors to consider in setting a strike price. These include:

technology specific factors such as capital and operating costs, financing costs and any build constraints; market conditions such as wholesale prices and the discount which generators face when signing a power purchase agreement (PPA); and policy considerations such as the specific contract design, choices about technology mix and meeting the ambition for renewable electricity.

The methodology for setting strike prices is designed to provide an equivalent level of support to that received under the renewables obligation for the period when developers can choose between the renewable obligation and contracts for difference. After this period, strike prices are set to reflect both expectations of falling technology costs over time and the financial constraints imposed by the levy control framework.

The data used for technology specific factors the draft Delivery Plan Consultation including capital and operating costs and financing costs is detailed in Annex 3 of DECC's electricity generation costs 20132 report. Page 7-9 of this report details the data used for all technologies. For offshore wind this draws from the Government response to the banding review (GRBR). When modelling future cost reductions for offshore wind evidence from the Crown Estate Study (the Offshore Wind Cost Reduction Pathways Study) and the Offshore Wind Cost Reduction Task Force report was also included. This is explained in more detail in annex 2 of DECC's electricity generation costs 2013.

DECC is currently considering responses and evidence received as part of the draft delivery plan consultation and this evidence may be used to inform final decisions on strike prices.



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