“Brace for Disruptions”- Europe Readies for Russian Gas Pains

August 25, 2022

Carbon Brief:

A UK government auction has secured a record 11 gigawatts (GW) of new renewable energy capacity that will generate electricity nine times more cheaply than current gas prices.

The projects are all due to start operating within the next five years up to 2026/27 and have agreed to generate electricity for an average price of £48 per megawatt hour (MWh) in today’s money. This is nine times cheaper than the £446/MWh current cost of running gas-fired power stations.

Most of the new capacity – some 7GW – will be offshore wind. Notably, for the first time, these projects were cheaper than the 1.5GW of onshore wind or 2.2GW of solar.

Once the pre-approved projects are built, Carbon Brief estimates they will generate 45 terawatt hours (TWh) of electricity per year, enough to meet around 14% of current UK demand.

Analysts said they would also save consumers an estimated £1.5bn per year in the late 2020s and cut annual average bills by £58, with most of the projects effectively subsidy-free.

This is the UK’s fourth biannual “contracts for difference” (CfD) auction round (AR4). As well as seeing record-low prices, with 11GW of capacity secured, it is also by far the largest.

The first round in 2015 awarded contracts to 2GW of capacity. This rose to 3GW in the 2017 second round, where offshore wind became cheaper than new gas plants.

The 2019 third round contracted 6GW of capacity, including the first subsidy-free offshore windfarms, with prices below those expected on the open market.

Future rounds will take place every year.

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