Sunday, 26 February 2012

A word on subsidies

A lot of folk are waking up the the fact that wind farms are not really about generating clean and green electricity. That they do generate electricity is not in doubt - providing they get they right sort of wind, you know, not too much, not too little just so. I will leave the 'green' thing alone for this post - other fish to fry don't you know!

I notice that the traffic on this blog has increased lately, and I suspect I know why - perhaps a development proposal close to a certain South Ayrshire landfill site has something to do with it. Anyway, for those of you who are new to this blog, I wanted to concentrate on subsidies in this post - and give a quick and easy method of understanding just how much one of those wind turbines actually generates in terms of cash for its operators. For those familiar with these things I apologise for covering what you may feel is old ground.

OK, on with the words. First of all, I need to explain what the term load factor means in relation to a wind turbine. Essentially, it is the actual percentage output of the rated capacity of a turbine (or group of turbines) over a period of time. For example, a 2MW turbine does not always generate 2MW. Over an extended period of time, it will actually generate far less. Wind farm developers will often claim a 30% load factor, but the reality is usually about 25% - and that's perhaps being a little generous. What this means is that a 2MW turbine will in actual fact only generate 25% of 2MW when taken over a period of time. The debate regarding load factors has raged for a long time and I'm not going to go into that here, so we'll go with 25%.

Now, electricity suppliers have to show that a certain percentage of the electricity they supply comes from 'renewable sources'. They do this by acquiring what are called Renewable Obligation Certificates (ROCs) - from the electricity generators. And these cost. Generators can trade these ROCs - they can even stockpile them for two reporting periods. And how much does a ROC cost? Well that varies. This site will give you an idea of how much a ROCs are being traded for. I'm not going to average out that lot of figures for the purpose of this post - but £47.50 looks like a reasonable average. For an onshore wind farm 1 ROC is created for each MWh of electricity generated. So, how much is a turbine worth in terms of ROC revenue per year? Let's take a 2 MW turbine and see: (2X24X365.25)X25% = 4,4383 ROCs. Taking the average price of a ROC as £47.50, we find that those 4,383 ROCs are worth £208,192.50. So essentially, a turbine is worth about £104,000, per MW of installed capacity per year (assuming a 25% load factor).

Let us also not loose sight of the fact that the electricity a turbine generates is also saleable (this site will give you idea of how much that can be per MWh). At the time of posting, the 48 hour average sell price was just over £50 per MWh. Finally, let's not forget that operators may also receive constraint payments to 'not produce electricity' - at a rate they can name. So essentially, a 2MW turbine could easily be worth around £400,000 per year in revenue for the generator, and more than 50% of that would be subsidy through the ROC system.

Now going back to those ROCs. Who pays for them? I'm afraid it is you and I - the consumer. Money for old rope eh? All of the cash required for suppliers to obtain ROCs from the generators is built into our bills.

And the local perspective? Here is a short list of the built and proposed wind farms shown on my map, along with an estimate of just how much cash each wind farm will generate, in terms of ROCs over a year and assuming a load factor of 25% and a ROC sell price of £47.50 per MWh:

  • Assel Valley - £4,424,090 (proposed)
  • Breaker Hill - £2,029,877 (proposed)
  • Dersalloch - £7,182,641 (proposed)
  • Hill of Ochiltree - £2,394,214 (proposed)
  • Straid Farm - £3,830,742 (proposed)
  • Tralorg Hill - £2,081,925 (proposed)
  • Kilgallioch - £30,916,586 (proposed)
  • Glenapp & Loch Ree - £10,409,625 (proposed)
  • Arecleoch - 12,491,550 (operational)
  • Artfield Fell - £2,977,172 (operational & approved)
  • Hadyard Hill - £12,491,550 (operational)
  • Mark Hill - £8,744,085(operational)
  • North Rhins - £2,394,214 (operational)

Now totalling that lot up, we arrive at a figure of £102,368,271. So, if everything on my map gets built, wind turbines will generate over £100,000,000 per year in ROC subsidies alone for the generators. And realistically you can double this figure to give a general guide as to the total revenue potential for the generators (which will then include the revenue for the electricity generated). £200,000,000 per year then - for at least 25 years (which, in case you are interested equates to £5,000,000,000 - yes, that's 5 billion). Given that so many of these turbines have been, or could be built on agricultural land, the phrase cash cow really does spring to mind. Annoyed? You should be. I am - my map still has some suspicious lonesome met' masts.......