Treasury lays out ‘strike price’ for electricity from new renewable power plants
The government has unveiled the level of financial support it will give to new renewable energy generation projects.
Setting out the detail of the government’s £100bn infrastructure plan today, Treasury secretary Danny Alexander said that the so-called’strike price’ of power from offshore wind under the government’s energy reforms would be £155 per MW/hr, falling to £135 by 2018.
To incentivise investment in renewable energy plants under the government’s energy market reforms, the government offers to guarantee the price of the energy generated from them for a number of years. If the wholesale price of the energy is lower than the “strike price” the government makes-up the difference - if it is higher it claws the money back.
Alexander said: “We set the price at the level we need to bring forward sufficient investment, but not a penny higher.”
He said he expected the reforms to incentivise investment in building up to 18 GWs of offshore wind energy capacity.
The prices are roughly similar to the support currently given through the Renewable Obligation Certificate.
The Treasury also announced it will start its capacity auctions, where electricity plant developers bid to build extra capacity or to reduce demand in exchange for funding, in 2014.
Draft strike prices in £/MWh