The UK PAC calls the over-generous wind farm licences as being shocking. The consumer will just have to pay higher prices.
The problem with subsidies is that it nearly always leads to the subsidies being milked for the benefit of the few and the cost is borne by the many. The purpose of the subsidy is never usually achieved (unless the benefit is taken to be the windfall that a few enjoy). Now the UK Public Accounts Committee points out the many blunders in wind farm licencing which will cost the consumer some £17 billion — but the money goes to those investors who got in early!!
There is nothing wrong with wind power per se and it surely has a limited contribution to make. But it is just not commercial or practical for base-load power generation and no amount of subsidy will make it so. I can’t help thinking that the few investors who benefit – directly or indirectly – have close friends among the powers that be that establish the generous subsidy rules. The subsidies are justified on the basis of “reducing carbon footprint” which is meaningless.
The PAC has published its 20th report of this session on offshore electricity transmission (full report pdf here). The Committee had taken evidence from the Department of Energy and Climate Change, the Gas and Electricity Markets Authority, and industry representatives on the new licensing regime for offshore electricity transmission.
“Not only is it unlikely that this new licensing system for bringing electricity from offshore wind farms onto the national grid will deliver any savings for consumers, it could well lead to higher prices”. ……
….. Margaret Hodge was speaking as the Committee published its 20th Report of this Session. The Department and the Gas and Electricity Markets Authority (the Authority) have introduced an elaborate regime that licences operators of offshore electricity transmission assets following competitions. The terms of the transmission licences awarded so far appear heavily skewed towards attracting investors rather than securing a good deal for consumers.
The transmission operators receive their income from the National Grid which recovers its costs from electricity suppliers and generators. Although all concerned state that no public funds are directly involved, the future payments to licensees, which will amount to around £17 billion, will in fact be passed onto consumers through electricity bills.
The investors’ estimated returns of 10-11% on the initial licences look extremely generous given the limited risks the investors bear. Licensees are guaranteed a fully retail price index-linked income for 20 years regardless of the extent to which assets are used. Yet penalties are limited to 10% of expected income in any one year if the operators fail to provide the transmission facilities when required.
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