Public Accounts Committee concludes consumers could foot £17bn bill for investment

MPs have criticised the government’s system to encourage investment in transmitting electricity from offshore wind power because it will cost consumers £17bn.

The government sells firms licences to build facilities to transmit electricity from offshore wind farms to land with guaranteed incomes for the winning bidders. Investors are expected to make margins of 10-11% on their investment.

The system is designed to help the government meet its target of providing 15% of the UKs electricity from renewable sources by 2020.

But a report by the Public Accounts Committee, published today, concluded the system was “too generous for the limited risks investors are being asked to bear”.

Chair of the committee Margaret Hodge said: “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.

“Indeed the terms of the transmission licences appear to have been designed almost entirely to attract investors at the expense of securing a good deal for consumers.”

The report said it was “unacceptable” that the government had not learned the lessons of early PFI contracts where investors were allowed to increase their margins through refinancing without sharing the profit with the relevant public bodies.

It also said the system had failed to create a competitive market pointing out that the first six licences auctioned off have been won by just two companies.